While the Supreme Court’s ruling on coal block allocations pulled down markets from their all-time highs, the Sensex nevertheless ended Monday’s session at a lifetime high close of 26,437.02 points. Expectations are high the economy and corporate earnings will recover and foreign funds continue to buy both stocks and bonds. Among its emerging market peers, India continues to draw the bulk of FII flows, at $12.79 billion so far in 2014. On Monday, FIIs bought $21.22 million worth of equities.

Global emerging markets (GEM) funds continue to prefer India over its EM peers. “…GEM funds are OW India and have been raising their OW in India constantly. Investors believe that the Indian growth story clearly stands out amongst the EM universe,” BofA-ML said in a report.

In 2014, the Sensex has beaten all the emerging markets with gains of 27.7% in dollar terms.

Deutsche Bank said in a report that IP growth during the April-June quarter has improved appreciably to a three-year high.

“This implies a robust pickup in industrial sector gross domestic product (GDP) growth for April-June as well, which is likely to push the headline GDP growth higher by about 100 basis points than the previous quarter’s outturn,” the report noted. Deutsche Bank's estimate of a 5.6% growth in June quarter would be the sharpest rise seen in nine quarters.

Meanwhile, the Tokyo-based financial services company Nomura expects the GDP to rise to a 10-quarter high of 5.9%.